Maybe you’re in the market for your first home. Or perhaps you’re looking to sell your current home and relocate your family. In either case, you’ve doubtless had some exposure to the house market. Whether looking at online listings or perusing local opportunities in your town or neighborhood, surely you’ve noticed the inflated prices of homes for sale today. It can be challenging enough finding the perfect home, but the overall increase in asking price can make this process even more difficult. You may have wondered, what causes this inflation? Why have home prices been on the rise in recent years?
Like most things that have to do with the economy, there isn’t just one reason for the spike. There are actually multiple variables to consider. Ultimately, supply and demand is a big factor. If the demand outweighs the current availability, then it becomes a seller’s market. A seller can get away with higher listing prices and higher rent because of limited supply. Unfortunately, there’s no one to blame for the comparatively lacking supply of today’s housing market. Oftentimes, even with the rapid growth of some towns and cities, builders can’t work fast enough to accommodate the ever-growing demand from an ever-growing population. Most recently, housing production has been severely affected by the COVID-19 pandemic, beginning back in 2020.
In fact, the pandemic is another major factor behind the inflated price of homes, if perhaps in unexpected ways. Records show that there are fewer houses for sale than there have been in past years. Perhaps the fear of COVID-19 infection has kept people from opening their homes to the outside world. The pandemic has also kept people inside, away from their jobs, their friends, and their lives. With this comes a decrease in spending on things such as fuel, food, drinks, entertainment, vacations, etc. As spending decreases, saving increases, and people set their sights on a new house. These circumstances continue, adding to the already growing demand which, in turn, boosts home prices even higher. It’s a vicious cycle that favors the fortune of the seller. This means that unless you currently have a home to sell before moving, you’re up against a steep cost.
It’s unclear when or if the price of housing will begin to decrease. Supply and demand is at the heart of it all, and the onset of a global pandemic only further destabilized the already fragile economy. The best thing you can do is keep an eye on the market. It may generally favor the seller, but you might just spot a diamond in the rough!